TMI Blog2016 (3) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... d for providing an output service. These are conditions precedent for availment of Cenvat credit, on duty paid on these goods, for remittance of service tax on the output services rendered, whether the output service is "BAS" or "BSS" (in the case of passive infrastructure providers) or "Telecom Services" (in the case of active infrastructure providers, namely where the telecom companies themselves own the infrastructure used for rendition of telecom services). As these conditions are not fulfilled, appellant is not entitled to Cenvat credit. Entitlement of Cenvat credit of duty of excise - Appellant provided telecom towers, pre-fabricated shelters and parts thereon to telecom service providers for providing passive infrastructure and supplier has paid Excise duty on on them as capital goods by classifying them under Chapter 85 of the Central Excise Tariff Act, 1985 - Held that: to decide whether Cenvat credit can be availed or not, first it is to be decided that whether towers and shelters are capital goods or immovable property. By relying on the judgments of Hon'ble Bombay High Court in the case of Bharti Airtel Limited vs. CCE, Pune - III 2014 (9) TMI 38 - BOMBAY HIGH COU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cenvat Credit to the tune of ₹ 2,59,95,327/- on shelters/parts as capital goods wherein the supplier has paid Excise duty on these items by classifying under Chapter 85 of the Central Excise Tariff Act, 1985 . 2. By Miscellaneous Order No.52850 to 52853 of 2015 dated 30.7.2015, a Learned Division Bench directed that the appeals in which the difference of opinion dated 28.7.2015 was recorded, be heard by a Larger Bench of three Members and that ST Appeal Nos.55227/2013, 51115, 51211, 51721, 51729, 52377, 52378, 52382/2015, which involve substantially similar issues as arising in the difference of opinion matters, be tagged to be heard by the same Larger Bench. The order dated 30.7.2015 directed that the matters be placed before Hon'ble President for an appropriate decision. 3. When the 21 appeals (13 arising pursuant to the difference of opinion and 8 directed to be tagged along with the 13 appeals) were listed for hearing before the Larger Bench on 3/11/2015, the Respondent/Revenue sought adjournment of the hearing. Hearing of these appeals was therefore adjourned to 8.12.2015. Composition of the Larger Bench had to be reconstituted on account of transfer of one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. CIT (Assts.) III, Hyderabad 1996 (82) ELT 4 (SC) is conclusive on this aspect. The observations of the Supreme Court in para 14 of this judgment being apposite, are reproduced: 14. Consequently, the Division Bench of the High Court with respect was in error when it took the view that a Special Bench can be constituted by the President only pursuant to a judicial order and not in exercise of his administrative powers. It is of course true that in any pending matter before a Bench of two learned members, if it is felt by the learned members that a Special bench is required to be constituted, they can pass a judicial order in the light of the procedure laid down by Regulation 98(A). But such a situation had never arisen on the facts of the present case. We have already seen above that the two learned members had recommended to the President to constitute a Special Bench for resolving the controversy centering round the construction of Section 115-J of the Income Tax Act by their communication dated 25th September 1992. That was styled as a reference under Section 255(3) of the Income Tax Act. It was merely a recommendation for invoking the administrative powers of the President ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itute a Special Bench. Even independent of such a reference on the judicial side the President can in an appropriate case even suo motu may move in the matter and can constitute a Special Bench of course on appropriate and germane grounds. It is however, true that the President in exercise of its administrative powers under Section 255(3) cannot just constitute a Special Bench without any rhyme or reason. Such an administrative exercise can be demonstrated to be unreasonable, capricious o r mala fide on a given set of facts. But in our view present case was not of that type. There was a conflict of opinion between two Benches of the Tribunal, namely, Madras and Hyderabad Bench. It is, however, true that Madras Bench decision was by a single member while the Hyderabad Bench decision was by a Division Bench. Still it could not be said that there was no conflict of decisions between two Benches of the Tribunal. That itself constituted a rational and valid ground for the President to act in exercise of his administrative powers to constitute a Special Bench if he thought it fit to do so. Such an exercise on the facts of the present case cannot be styled as an arbitrary or whimsical or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfrastructure Ltd. (supra) and Reliance Infratel Ltd. (supra), or; Member (Technical) is correct in holding that post 2006, wherever appellants are paying service tax under the category of Business Auxiliary Services , or Business Support Services for providing passive infrastructure, the appellants are not entitled to take Cenvat credit on towers, pre-fabricated shelters parts thereon etc. In the light of the decision in the case of Bharti Airtel Ltd. (supra). 10. We have perused the orders prepared by Member (Technical) and Member (Judicial) which led to the above-mentioned difference of opinion. The core issue is the eligibility of the appellants for credit of duty paid on MS Steel Angles/Towers, pre-fabricated shelters and parts thereon. The Division Bench had agreed on the view that the appellants before them were not eligible for credit of duty on towers and cabins if they are providing telecommunication service as output service. This conclusion was following the decision of Hon'ble Bombay High Court in Bharti Airtel Ltd. vs. CCE, Pune - III reported in 2014 (35) S.T.R. 865 (Bom.). However, when the appellants are providing output service of 'business au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that altitude to generate uninterrupted frequency; (vii) There is no breaking of Cenvat chain as the appellants are paying duty on towers and shelters in CKD condition. These are simply installed on a foundation by contractors. These contractors issue invoices for payment of service tax. There is no loss of identity of goods during the course of erection. 12. The learned Counsels representing the various appellants placed reliance on the decisions of Hon'ble High Courts and Hon'ble Supreme Court in support of their various above assertions. These are examined later in this order. 13. The learned AR appearing on behalf of Revenue submitted that:- (a) the issue relating to eligibility of towers and shelters for Cenvat credit has been clearly settled by the Hon'ble Bombay High Court in Bharti Airtel Ltd. (supra). The categorical finding after elaborate analysis by the Hon'ble High Court has not been deviated by any other High Court or over ruled by Hon'ble Supreme Court; (b) The Central Excise duty paid on MS Angles, Channels and pre-fabricated buildings are claimed as credit by the appellants. These items have no direct nexus to the output ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Credit on Capital Goods :- Rule 2 (a) defines 'capital goods'. It is apparent that capital goods as understood in commercial parlance or industrial circles cannot be automatically considered as capital goods for the purpose of Cenvat Credit Rules. To be 'capital goods' the goods should fall in any one of the categories mentioned in the definition. The definition relevant to the issue now under consideration, is all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, Heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804 of the 1 st Schedule to the Central Excise Tariff Act ; and components, spares and accessories of these goods . It is clear that capital goods should fall under the specified tariff classification for eligibility to duty credit. However, there is no such restriction for the components, spares and accessories of such capital goods. 16. The central point of dispute is that the appellants are getting duty paid MS Angles, Channels etc. to the required site and getting them erected into a tower on a concrete foundation. It is the contention of the appellants that they are buying the towers in a CKD c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. CCE, Vadodara - I reported in 2009 (235) E.L.T. 636 (Tri. - LB) to conclude that tower being admittedly an immovable structure cannot be an accessory of any kind of instrument. 17. Apart from the above ratio, we find that to become an accessory of a capital goods there should identified capital goods. The claim of the appellant is that BTS is a capital goods and the towers and shelters would be it's accessory. We find that no BTS as identified capital goods emerges in the present case. Towers and shelters are erected and fixed at the desired site. The BTS electronic equipment is brought and installed in the site. These towers and shelters no doubt become part of the overall infrastructure created at site. However, to term the tower and shelter as an accessory of BTS is not sustainable. Various accessories can be considered alongwith BTS to become part of overall capital goods. Such proposition is not however applicable to towers and shelters as they are erected at site, installed as permanent structures and are used for installing/housing the telecom equipment. The question of Immovability of tower and its relevance:- The appellants contended that (a) set of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he resultant structure has been elaborately discussed as can be seen in the order. It will not be correct to say that the Hon'ble High Court did not examine the relevant criteria or the legal principle in arriving at the finding of immovability in respect of these towers. The fact that towers can be dismantled, moved and re-erected at another location by itself does not make them movable goods. Steel angles, bolts, nuts are brought and fabricated into an embedded tower. These can be dismantled in to angles and channels, nuts and bolts, substantially restoring to the original condition of the raw material. However, what is transported are angles and channels . The towers when they are embedded are considered as immovable property. This ratio has, in our considered view, been adopted by the Hon'ble Bombay High Court in Bharti Airtel Ltd. (supra). 21. Learned Counsel relied on the Hon'ble Supreme Court's decision in CCE, Ahmedabad vs. Solid Correct Engineering Works reported in 2010 (252) E.L.T. 481 (S.C.). The Supreme Court was examining excise duty liability of asphalt drum hot mix plant. The Court examined Section 3 (26) of the General Classes Act with referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd further put to use for mounting/installing telecommunication antenna and other equipment. It is necessary to decide whether duty paid MS angles/shelter are used by infra companies for providing business support service to telecom companies or for providing telecom service by telecom operators. This will bring us to the next question relevant to decide this issue. Question of nexus and Cenvat credit flow :- The duty payment is on MS angles, channels (or towers in CKD as claimed by the appellants) and pre-fabricated shelters. The credit of this duty is claimed. The admitted basic requirement for eligibility of any duty credit is that goods on which duty is paid (credit of which is claimed) should have a connection or nexus to the output service. The credit availed on input is used for discharging tax on output service. In the present case, the duty paid MS angles, channels etc. are brought to the site, fabricated into towers on a concrete platform. Similarly, the duty paid pre-fabricated shelters are brought and fixed to the ground base firmly. On such towers, the antenna or dish are fixed and connected by cables to electronic equipment housed in the pre-fabricated shelter on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court that doors and electrical boxes are to be considered as parts of electricity generator is not of any help to appellants. Applicability of ratio followed for telecom companies to infrastructure companies :- On the above analysis, the first point for difference of opinion referred to this Larger Bench relating to non-applicability of the decision of the Hon'ble Bombay High Court in Bharti Airtel to infrastructure companies to provide business support service to telecom operators can be examined. We find in the normal course the nature of output service should not have any bearing to decide credit eligibility on capital goods now under dispute. A distinction was sought to be made that the decision of Hon'ble Bombay High Court was applicable only to active telecom service providers and not to providers of passive infrastructural support to such telecom operators. Reliance was sought to be placed on the decision of the Tribunal in GTL Infrastructure Ltd. vs. CST, Mumbai reported in 2015 (37) S.T.R. 577 (Tri. - Mumbai) and Tribunal's final order No. A/382-383/2015 dated 26/11/2014 in Reliance Infratel Ltd. vs. CST, Mumbai - II reported in 2015 (38) S.T.R. 98 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies in deciding the eligibility of Cenvat credit on the impugned items now under consideration. 24. Further, it was contended by the appellants that even if towers shelters and other materials are held to be immovable property, credit cannot be denied on them. Reliance was placed on the decision of Hon'ble Andhra Pradesh High Court in CCE, Visakhapatnam - II vs. Sai Sahmita Storages (P) Ltd. reported in 2011 (270) E.L.T. 33 (A.P.), Hon'ble Gujarat High Court decision in Mundra Ports and Special Economic Zone Ltd. reported in 2015-TIOL-1288-HC-AHM-ST and Hon'ble Punjab Haryana High Court decision in Belsonica Auto Components India P. Ltd. reported in 2015 VIL 300 (P H - ST). In Sai Sahmita Storages (P) Ltd. (supra), the Hon'ble Andhra Pradesh High Court held that there is no dispute that the assessee used cement and TMT bar for providing storage facility without which storage and warehousing services could not have been provided. The question relating to creation of an immovable asset and the implication of Cenvat credit flow in such situation was not examined in detail in the said order. Similarly, the Hon'ble Gujarat High Court also arrived at similar c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cenvat credit either as capital goods or as inputs and as such some supplier classifying the product under Chapter 85 by itself does not make them eligible for credit if they are otherwise not entitled for the same. Learned Counsel contended that the denial of credit as held by Hon'ble Bombay High Court is only on classification of these shelters. We find that the Hon'ble High Court categorically held that towers and PFB are in the nature of immovable goods and are non-marketable and non-excisable. Further, we find that the analogy drawn by learned Counsel with plant and machinery to the present issue is not correct. The plant and machinery classifiable under specific tariff heading are manufactured and cleared on payment of duty as such machinery. Here, the facts are clearly different. Accordingly, the second point of reference is also answered against the appellant and in favour of Revenue. (S.K. Mohanty) Judicial Member (B. Ravichandran) Technical Member Per: Justice G. Raghuram: I had the benefit of the draft opinion prepared by the Hon'ble Member (Technical) Shri B. Ravichandran, in the batch of thirteen appeals arising pursuant to a difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... com service providers, for eventual rendition by the later of the taxable telecom services and in the process provide the taxable BAS or BSS , as the case may be, to telecom companies. 6. During the period in issue, the relevant provisions of Cenvat Credit Rules, 2004 defined capital goods , to the extent material and relevant, as: All goods falling under Chapters 82, 84, 85 and 90 of the First Schedule to the Excise Tariff Act (rule 2(a)(A)(i)]; and Components, spares and accessories of the goods specified in clause (i) (rule 2(a)(A)(iii)]. Input is defined to mean all goods, except light diesel oil etc. used in providing any output service (rule 2(k)(iii)]. Rule 3 of the 2004 rules authorises a provider of taxable service to take credit of specified duties paid on any input or capital goods received in the premises of the provider of the output service. 6. For entitlement of credit on towers, shelters or parts thereof, it is therefore essential that these should be goods and should fall, either within the ambit of capital goods specified in Rule 2(a)(A)(i) of the rules, namely goods falling under Chapters 82, 84, 85 or 90 or to components, spares or accessori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hutchison Max Telecom Private Limited - 2008 (224) ELT 191 (Bom.), the Hon'ble High Court concluded that towers are immovable property. 9. In State of A.P. vs. BSNL - 2012 (25) STR 321 (A.P.) the issue was regarding validity of levy of sales tax, under the provisions of the A.P. VAT Act, 2005, inter-alia on sharing of telecom infrastructure. On facts, in the A. P. Case, some telecom companies erected towers on sites and permitted other similar service providers to fix their antennas on the towers and thus shared the infrastructure, for which a monthly infrastructure share fee was received, towards consideration. In para 44 of this judgment, Hon'ble High Court concluded that since telecommunication towers of a height of around 90 mtrs. are embedded either to the earth or to the rooftop of a building and fastening of such huge structures was necessitated, these are excluded from the ambit of goods and constitute immovable property ; and since transfer of the right to use immovable property does not fall within the scope of the VAT Act, there is no liability to tax thereunder. This decision did refer to the decision of the Supreme Court in Solid Correct Engineering W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 1 feet deep. That argument needs to be tested on the touch stone of the provisions referred to above. Section 3 (26) of the General Clauses Act includes within the definition of the term immovable property things attached to the earth or permanently fastened to anything attached to the earth. The term attached to the earth has not been defined in the General Clauses Act, 1897. Section 3 of the Transfer of Property Act, however, gives the following meaning to the expression attached to the earth . (a) rooted in the earth, as in the case of trees and shrubs; (b) imbedded in the earth, as in the case of walls and buildings; (c) attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached. 19. It is evident from the above that the expression attached to the earth has three distinct dimensions, viz. (a) rooted in the earth as in the case of trees and shrubs (b) imbedded in the earth as in the case of walls or buildings or (c) attached to what is embedded for the permanent beneficial enjoyment of that to which it is attached. Attachment of the plant in question with the help of nuts and bolts to a foundation no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the land wherein the person who causes the annexation possesses articles that may be removed without structural damage and even articles merely resting on their own weight are fixtures only if they are attached with the intention of permanently improving the premises. The Indian law has developed on similar lines and the mode of annexation and object of annexation have been applied as relevant test in this country also. There are cases where machinery installed by monthly tenant was held to be moveable property as in cases where the lease itself contemplated the removal of the machinery by the tenant at the end of the tenancy. The mode of annexation has been similarly given considerable significance by the courts in this country in order to be treated as fixture. Attachment to the earth must be as defined in Section 3 of the Transfer of Property Act. For instance a hut is an immovable property, even if it is sold with the option to pull it down. A mortgage of the super structure of a house though expressed to be exclusive of the land beneath, creates an interest in immovable property, for it is permanently attached to the ground on which it is built. 23. The courts in this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vable property even when the embedding was meant only to provide a wobble free operation of the machine. Repelling that contention this Court held that just because the machine was attached to earth for a more efficient working and operation the same did not per se become immovable property. The Court observed: 5 Apart from this finding of fact made by the Tribunal, the point advanced on behalf of the appellant, that whatever is embedded in earth must be treated as immovable property is basically not sound. For example, a factory owner or a householder may purchase a water pump and fix it on a cement base for operational efficiency and also for security. That will not make the water pump an item of immovable property. Some of the components of the water pump may even be assembled on site. That too will not make any difference to the principle. The test is whether the paper-making machine can be sold in the market. The Tribunal has found as a fact that it can be sold. In view of that finding, we are unable to uphold the contention of the appellant that the machine must be treated as a part of the immovable property of the company. Just because a plant and machinery are fixed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing attached to the earth. And this has to be ascertained from the facts and circumstances, of each case. (emphasis supplied) 29. Applying the above test to the case at hand, the plants in question were neither attached to earth within the meaning of Section 3 (26) of the General Clauses Act nor was there any intention of permanently fastening the same to anything attached to the earth. 30. Reliance was placed by Mr. Bagaria upon the decision of this Court in Quality Steel Tubes (P) Ltd. Vs. CCE, U.P. - 1995 (75) E.L.T. 17 (S.C) and Mittal Engineering Works (P) ltd. v. CCE, Meerut - 1996 (88) E.L.T. 622 (S.C.). In Quality Steel Tubes case (supra) this Court was examining whether 'the tube mill and welding head' erected and installed by the assessee for manufacture of tubes and pipes out of duty paid raw material was assessable to duty under residuary Tariff Item No. 68 of the Schedule being excisable goods. Answering the question in negative this Court held that tube mill and welding head erected and installed in the premises and embedded to earth ceased to be goods within the meaning of Section 3 of the Act as the same no longer remained moveable goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a sugar factory as was the position in the Mittal Engineering Works case (supra). The plants with which we are dealing are entirely over ground and are not assimilated in any structure. They are simply fixed to the foundation with the help of nuts and bolts and in order to provide stability from vibrations during the operation. 32. So also in T.T.G. Industries Ltd. v. CCE Raipur - 2004 (167) E.L.T 501 (S.C.), the machinery was erected at the site by the assessee on a specially made concrete platform at a level of 25 ft. height. Considering the weight and volume of the machine and the processes involved in its erection and installation, this Court held that the same was immovable property which could not be shifted without dismantling the same. 33. It is noteworthy that in none of the cases relied upon by the assessee referred to above was there any element of installation of the machine for a given period of time as is the position in the instant case. The machines in question were by their very nature intended to be fixed permanently to the structures which were embedded in the earth. The structures were also custom made for the fixing of such machines without which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elters or affixation of towers obtained in CKD condition and pre-fabricated shelters and the process employed for their erection at a site; the degree of permanency that results from their attachment to the site by bolting them on to concrete foundations; whether the intendment in so embedding these to the site, is for permanent and beneficial enjoyment of the earth and other relevant and cognate fact specific aspects, by applying the nuanced tests of immovability expounded in Solid Correct Engineering Works, may perhaps lead to a different conclusion then the one emerging from the Hon'ble Bombay High Court's rulings in Bharti Airtel Limited and Vodafone India Limited or the Andhra Pradesh High Court's judgment in BSNL. 14. In our respectful view however the challenge to the ratio and conclusions of the High Court's decisions in Bharti Airtel Limited and Vodafone India Limited, on the ground that these are predicated on an incorrect and impermissible interpretation of the rationes in Solid Concrete Engineering Works, must await an appellate consideration, when and if challenged, by the Hon'ble Supreme Court. It is outside the province and jurisdiction of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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